Mauritius Economic Outlook

The Mauritian economy grew by 3.7% in 2015 – slightly more than the 3.6% recorded in 2014 – and is projected to grow by 3.8% in 2016 and 4.0% in 2017 on the back of stronger domestic and external demand.

Mauritius was rated as the best performing economy in Africa and was ranked 46th out of 140 economies in the latest edition of the World Economic Forum Global Competitiveness Report.

The government introduced an innovative urban development approach, consisting of 8 “Smart Cities” and 5 techno-parks, in an effort to boost sustainable economic growth and enhance the competitiveness of Mauritius.

The Mauritian economy recorded real growth of 3.7% in 2015, up from the 3.6% recorded in 2014. Economic growth in 2015 was driven by the information and communications technology and by the financial and insurance sectors, which grew by 6.3% and 5.6%, respectively. These gains were partially offset by the poor performance of the construction sector, which contracted by 5.4% over the same period. The government’s fiscal stance in 2015 remained expansionary, with the budget deficit increasing to 4.4% of GDP, compared with 3.2% at the end of 2014. The Bank of Mauritius (BoM) lowered the key repo rate to 4.4%, from 4.65%, taking into account the slow pace of growth and subdued inflation levels. Inflationary pressures in the domestic economy were generally low on account of subdued food prices and declining international commodity prices. Inflation stood at 1.3% in December 2015, and is expected to remain within the 2.5-3.0% range in the short term. Mauritius’ current account deficit fell to 4.9% in 2015, compared with 5.9% in 2014, largely due to the impact of weak oil prices on merchandise imports and a booming tourist sector on service exports.

Evidence from the first year in office for the Alliance Lepep (AL), led by Sir Anerood Jugnauth, supports the view that the policy proposals of the new government will focus on promoting inclusive growth and investment in the economy, with fiscal consolidation a secondary concern in the short term. The government’s main announcements to date have been its Economic Mission Statement (Achieving the Second Economic Miracle and Vision 2030 – delivered in August 2015) and its first budget (Mauritius at the Crossroad – delivered in March 2015), which had a distinctly expansionary flavour (e.g. higher social spending), but was also largely aimed at drawing in private investment through tax incentives and major infrastructure projects. The budget also included a proposal to improve fiscal transparency by abolishing special funds and boosting sustainability with the creation of a “Legacy Sovereign Fund”. The 2015-19 government programme also places special emphasis on infrastructure development and promoting the “Blue Economy” while at the same time enhancing human capital development as the country looks to reduce the stubbornly high levels of unemployment which remain in the 8.5-9% range.

During the delivery of its 2015/16 national budget, the Government of Mauritius announced the set-up of the “Smart City Scheme” to provide an enabling framework and a package of attractive fiscal and non-fiscal incentives to investors for the development of smart cities across the island. The smart-city concept is about providing investors, nationals and foreigners, with options for living in sustainable, convenient and enjoyable urban surroundings. These new cities will be built around the “work-live-play” lifestyle in a vibrant environment with technology and innovation at their core.